South Korea household borrowing posts biggest jump in over three years

SEOUL (Reuters) – South Korea’s household borrowing rose in August by the biggest amount in more than three years, led by a record jump in mortgage demand, central bank data showed on Wednesday.

Household borrowing from banks stood at 1,130.0 trillion won ($840.52 billion) at the end of August, up 9.3 trillion won over the month, the biggest monthly increase since July, 2021.

Mortgage loans rose 8.2 trillion won, the biggest increase since the data release started in 2004, according to the Bank of Korea (BOK).

At a meeting with local banks on Tuesday, the country’s financial watchdog expressed concern about a rapid pick-up in household debt and said such financial imbalances may turn into systemic risk. The head of the watchdog also urged banks to enhance risk management, after authorities tightened lending rules earlier this month.

“In September, household debt growth is expected to narrow from August on government measures and banks’ management efforts,” a BOK official said, adding there were also were temporary factors impacting the data in August.

The Financial Services Commission said authorities would implement additional measures currently being reviewed in a timely and bold manner, if the housing market remains heated or household debt growth accelerates.

Last month, the central bank’s board members were cautious about lowering interest rates, as they were concerned about rising risks to financial stability despite slowing inflation, minutes from the policy meeting showed.

($1 = 1,344.4100 won)